Afghanistan's economy slowly on rise, to grow 2.6 percent this year - World Bank

KABUL (Reuters) - Afghanistan’s economy is expected to grow 2.6 percent this year, up slightly from the previous year despite deteriorating security, the World Bank said in a report on Tuesday.

While the figure is up from 2.2 percent last year, it does not keep up with the country’s population growth of roughly 3 percent, meaning that gross domestic product per capita continues to decline.

“In the next three to four years, there are things that can be done to boost growth to between 4 and 5 percent,” said Shubham Chaudhuri, the World’s Bank’s Country Director for Afghanistan.

Chaudhuri, presenting a report on Afghanistan’s economy at the World Bank’s fortified headquarters in Kabul, said that agriculture, mineral attraction and the country’s youth were its biggest assets, as well as its geography as a regional land bridge.

The improved growth outlook will be welcomed by President Ashraf Ghani, whose technocrat government is seen as unstable but appears to be making the reforms that international donors -- who provide more than half of Afghanistan’s funding -- have been seeking.

Parliamentary elections are due to be held next year, with a presidential vote expected in 2019.

An interior view of the City Walk shopping mall in central Kabul March 10, 2014. REUTERS/Morteza Nikoubazl/Files

Business sentiment is also on the rise, the World Bank said, though it is still lower than in 2014 when most foreign troops withdrew from Afghanistan.

Growth is significantly below the “war economy” figures of the late 2000s, which saw annual rises averaging nearly 10 percent, but the World Bank believes it will continue to rise.

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The organisation projects 3.2 percent growth next year, though that assumes no deterioration in the country’s security. This appears unlikely given a recent increase in attacks by various militant groups.

One of the major tests for Afghanistan’s stability after a U.S.-led invasion ousted the Taliban government a decade and a half ago is its ability to collect taxes.

Tax revenue in the first eight months of the year was 13 percent higher than the same period last year, the World Bank said.

The country has long been plagued by corruption and tax evasion.

Inflation remains in the single-digits, with consumer prices up 3.8 percent in the 12 months to September.